America Online 2014 Annual Report Download - page 37

potential liability. Network and data security breaches or unauthorized access have resulted in, and may in the
future result in, a combination of significant legal and financial costs, increased remediation and other costs,
damage to our reputation and a loss of confidence in the security of our products, services and networks that
could have an adverse effect on our business. We take steps to prevent unauthorized access to our network and
consumer and customer data and corporate systems, however, because the techniques used to obtain unauthorized
access, disable or degrade service, or sabotage systems change frequently or may be designed to remain dormant
until a triggering event, we may be unable to anticipate these techniques or implement adequate preventative
measures. In addition, hardware, software or applications we develop or procure from third parties may contain
defects in design or manufacture or other problems that could unexpectedly compromise network and data
security. Unauthorized parties may also attempt to gain access to our systems or facilities through fraud, trickery
or other forms of deceiving our team members and contractors. We can give no assurance that a future incident
could not be caused by events such as criminal activity, sabotage or espionage, computer viruses, hacking and
other cyber-security attacks, router disruption, automated attacks such as denial of service attacks, power
outages, natural disasters, accidents, terrorism, equipment failure, malware in advertisements, or other events
within or outside our control which could adversely affect us and our consumers.
As we previously disclosed, we have determined that there was a security incident in 2014 in which there
was unauthorized access to information regarding a significant number of user accounts. This information
included AOL users’ email addresses, postal addresses, address book contact information, encrypted passwords
and encrypted answers to security questions that we ask when a user resets his or her password, as well as certain
employee information. We believe that the individuals or entities have used this contact information to send
“spoofed” emails that appeared to come from roughly 2% of our email accounts. We have no indication that the
encryption on the passwords or on the answers to security questions was broken or that the incident resulted in
disclosure of users’ financial information, including debit and credit cards, which is also fully encrypted. Our
investigation of the security incident is complete and there is no indication that we have incurred or will incur a
material loss associated with the security incident.
If we cannot continue to enforce and protect our intellectual property rights, our business could be adversely
affected.
We rely on patent, copyright, trademark, domain name and trade secret laws in the United States and similar
laws in other countries, as well as licenses and other agreements with our employees, consumers, content
providers, suppliers and other parties, to establish and maintain our intellectual property rights in the technology,
content, products and services used in our operations. These laws and agreements may not guarantee that our
intellectual property rights will be protected and our intellectual property rights could be challenged or
invalidated. Amendments to or interpretations of U.S. patent laws or new rulings around U.S. patent laws may
adversely impact our ability to protect our new technologies, content, products and services and to defend against
claims of patent infringement. In addition, such intellectual property rights may not be sufficient to permit us to
take advantage of current industry trends or otherwise to provide competitive advantages, which could result in
costly redesign efforts, discontinuance of offerings, decreased traffic and associated revenue or otherwise
adversely affect our business. As we acquire and publish more original content, our intellectual property may be
increasingly subject to misappropriation by others, and the costs to protect and enforce our intellectual property
rights may increase. Additionally, as new generic top-level domains launch, we will likely register a significant
number of domain names and initiate more enforcement actions in order to protect and defend the trademark
rights in our brands, and we may incur significant costs as a result.
We have been, and may in the future be, subject to claims of intellectual property infringement or tort law
violations that could adversely affect our business.
Many companies (including patent holding companies) and individuals own patents, copyrights, trademarks,
and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of
intellectual property rights. As we develop and offer new products, services, and technologies through various
distribution channels we may experience an increase in the number of intellectual property claims against us.
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